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The Energy Blog is where all topics relating to The Energy Revolution are presented. Increasingly, expensive oil, coal and global warming are causing an energy revolution by requiring fossil fuels to be supplemented by alternative energy sources and by requiring changes in lifestyle. Please contact me with your comments and questions. Further Information about me can be found HERE.

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December 01, 2008

EPA Raises Raises Requirements for Renewable Fuels

An item of interest to ethanol producers and other supporters of ethanol is this announcement by EPA, as further clarified by this announcement by EERE:

The U.S. Environmental Protection Agency (EPA) announced on November 17 that the 2009 renewable fuel standard (RFS) will require most refiners, importers, and non-oxygenate blenders of gasoline to displace 10.21% of their gasoline with renewable fuels such as ethanol. That requirement aims to ensure that at least 11.1 billion gallons of fuels will be sold in 2009. . . . While the RFS requirement is increasing by about 23%—from 9 billion gallons in 2008 to 11.1 billion gallons in 2009—the percentage requirement is increasing by nearly one third, from 7.76% in 2008 to 10.21% in 2009.

The larger relative increase in the percentage requirement reflects the fact that fuel consumption is expected to be lower in 2009, so a greater percentage of renewable fuel is needed to reach 11.1 billion gallons of renewable fuels. . . .

The 2009 RFS is also pushing up against what is known as the "blend wall." Most gasoline sold in the United States contains at most 10% ethanol (a blend known as E10), but the new RFS requires a slightly greater percentage of gasoline to be displaced with renewable fuel. . . . One way to sell greater amounts of ethanol is to sell E85, a blend of 85% ethanol and 15% gasoline, but despite rapid growth in the number of E85 pumps, there are still only about 1,800 E85 pumps in the United States. . . . To address the blend wall issue, DOE and others are studying the use of mid-range blends, such as E15 and E20, for use in standard gasoline-burning vehicles. Allowing all gasoline blends to contain up to 20% ethanol would double the potential market for ethanol.

The Energy Independence and Security Act of 2007 requires that the RFS to have annual increases until it reaches 36 billion gallons of ethanol in 2022, 15 billion gallons must come from corn ethanol and 22 billion gallons from second-generation biofuels. In 2015 corn ethanol is required to reach a peak of 15 billion gallons out of the total renewable fuel target of 20.5 billion gallons. The market share for corn ethanol remains at 15 billion gallons until 2022 when the target total for all renewable fuels reaches 36 billion gallons.

On a purely voluntary basis, gasoline blenders have always used more ethanol than the required minimum because increasingly high oil prices made ethanol an attractive fuel in its own right. Today, 12/1/08, with oil at $50.77/bbl (NYMEX) and RBOB gasoline at $1.095/gal (NYMEX) and ethanol at $1.596/gal at the Chicago Board of Trade (CBOT) it makes no economic sense to blend ethanol with gasoline.The RFS will become binding for the first time in 2009. Gasoline blenders will have to use 11.1 billion gallons of ethanol because that is what the law tells them, not because it makes economic sense

This was always going to happen at some time, given the much more ambitious RFS volume obligations in the 2007 law. It was never going to be possible to blend 20.5 billion gallons into the gasoline supply by 2015 without much wider uptake of E85 vehicles or other modifications of the U.S car fleet. But the unprecedented cyclical reduction in gasoline demand has brought the blending wall much closer.

While I am a supporter of ethanol as a means of reducing our dependence on foreign oil, I am not a supporter of the use of corn ethanol to the extent required by the RFS. Ten billion gallons per year (bgy) of corn ethanol is about the maximum that should be supported, let alone 11 or 15 bgy. Greater amounts seems to be an irresponsible way of utilizing U.S. farm resources at the present time. I would advocate reducing theses requirements to ten bgy and the total requirement from all sources of biofuels frozen at 11 bgy until cellulosic ethanol, biodiesel and biobutanol become more viable sources of fuel; greater amounts can always be produced if the market supports it. In fact it is time to take the emphasis off corn ethanol entirely and concentrate on cellulosic ethanol made from non-food feedstocks and biobutanol which can be used in up to 100% concentrations in current vehicles. After these technologies have been proven to be economically viable, say by 2015, then let market forces determine which flavor of fuel is most viable. Supporters of cellulosic ethanol claim that current corn ethanol production facilities can be easily converted to producing cellulosic ethanol, thus increasing the yield of fuel per acre.

The establishment of a market for ethanol and other renewable fuels is a worthy objective to prepare for future times when the cost of oil once again becomes more onerous and in short supply. The market for corn ethanol has been established and should be maintained. Subsidies for corn ethanol should be dropped as soon as possible, but this will not be possible as soon as I had anticipated, due decreasing prices for oil. I would favor that any subsidies be based on the difference between the cost of gasoline and the cost of ethanol. Because of corn ethanol, markets for biodiesel, biobutanol, cellulosic ethanol and any future biofuels should develop more easily and subsidies be required for only a short time, if at all.

Requiring all new vehicles be flex-fueled vehicles makes a lot of sense to me. This is the least costly way to enable widespread use of biofuels. Some $30 to $100 per car seems to be a reasonable price to pay to enable wider use of biofuels. Pontiac's new G6 is availablewith a flex-fuel 3.5L V6 at no additional cost over the gas version in the full range of body styles. Is this a sign of things to come? and by an American car company!

Vinod Khosla, the well known Silicon Valley, in his words, venture assistant, to technology based ventures, has a good, seemingly objective, White Paper, Food vs Fuel that should be of interest to readers of this post and thosee interested in the renewable fuels market in general. His view on corn ethanol is very similar to mine (which I developed independently, much before I heard of him), but expressed much more eloquently:

The future that Professors Runge, Senauer and Lester Brown and many other critics of corn ethanol see is similar to what we envision – cellulosic and biomass-based biofuels that offer better potential solutions, higher efficiencies, and a better environmental footprint. However, it is vital to note that none of this would have been viable without corn-ethanol in the first place – none of the university research, financial capital, or political backing for cellulosic would exist without the corn-based version proving its functionality and priming the market and infrastructure. Ethanol in its current manifestations has provided a valuable stepping stone away from the age of oil, and the transition to a cleaner and more environmentally friendly future based on cellulosic biofuels.

When Solar panels were invented, millions of people were ecstatic about using clean and renewable energy coming from the sun. Unfortunately political lobbying seems to play a major role in subsidizing its use. Tapping the sun’s energy and generating electricity from it is one of the brightest ideas man has come up with. Sadly politics always come into play destroying the innovation of Science.

EPA’s current guidance on the use of aftermarket conversion systems is available here: http://www.epa.gov/OMS/cert/dearmfr/cisd0602.pdf.

Anyone who manufacturers, installs or sells a non-certified system runs the risk of being found guilty of tampering and could face serous fines. The EPA certification requirements apply to all alternative fuel vehicle retrofit systems including natural gas, propane, methanol, ethanol and/or hydrogen retrofit systems.

My analysis covered an angle you failed to address and ponder. I understand the corn in question is feed corn. Yet I never said Mexicans were vegetarians and relied upon it for direct consumption. Ever been to a Mexican restaurant? They like their beef, chicken and pork just as much as Americans do, don't they?. The hardship of being able to afford feed for your farm animals qualifies as a direct result of inflated corn prices. 2945abc45 0930 http://www.divaluxury.com

This topic seems to get more interesting as each day passes. Resources should not be wasted as it could still be used in the future. This regulation will save a lot of money and resources if implemented thoughtfully. It would be a long term goal but it is achievable.

These reports include company insights of leading companies like Petroquest Energy Inc, Valero Energy Corporation etc. Energy maps which include the major gas and oil and fields, coalfields and basins, of the world’s leading economies like Middle East, China, Tobago and Trinidad.

Demand for solar power is rising, and that’s awesome - but so too are costs, no question. Economics 101 tells us that as demand rises, costs actually fall - and that’s spelling trouble for many solar power manufacturers in the US. Demand is rising abroad, but the economic models in other countries are intact. In any new industry, it’s all about cost efficiency and control, and solar power just isn’t there yet. Take a moment to check out our solar power blog - we write all about these theories and more.

David, everything we do has impact. The question is: what options are the least malevolent, the cleanest, the least likely to cause resource and environmental problems at scale, the least likely to cause conflict and inequity around the world, etc.?